Five reasons my money is on Austin for Amazon’s HQ2

DJ Wilson September 11, 2017

I was in Austin, Texas, last week when Amazon released it’s news that it was shopping for an second, “equal” headquarters. It was a topic during a breakfast event I attended, a Texas Tribune interview of the San Antonio Mayor Ron Nierenberg.

His response to the question of his interest level in Amazon was telling for a number of reasons.

“Mayor Ron Nierenberg: When an economic development opportunity meets our community objectives – and we don’t know really all of the measures of the Amazon deal. In fact, this is a crazy new normal that we’re in that corporations essentially tells us show me the money, basically, to cities across the country, we are going to be very measured in our response.

Tribune: But you are going to compete?

RN: Sure, if it meets our objectives. We have to assess it one hundred percent which we have not done yet.”

Put differently, and discussed openly during this event, is that the impact from Amazon bringing 50,000 jobs to a community will be mixed. It will have major economic consequences, many good, some perhaps less so.

As cities consider how and whether to make a play for Amazon’s HQ2, cities will need to ask themselves if the deal “meets our objectives.”

Almost every list of possible sites for Amazon includes Austin. There are a host of reasons that is the case, but many of them can be boiled down to one primary statement that Amazon can make but which other cities may not be able to: Amazon “meets our objectives.”

Here are are some key reasons why Amazon will find a fit in Austin and why I believe Austin will create one of the most compelling arguments for Amazon’s relocation.

Austin is already committed to the tech sector

Few cities have openly courted and recruited tech companies as openly as Austin has. San Francisco and Seattle are on that list, to be sure, but Austin is a leader, in its own right.

The presence of the University of Texas means that Amazon will have a steady flow of young talent from which to recruit. It has a population of talent at other companies in the region that it can pull from as well.

We want to encourage states/provinces and communities to think creatively for viable real estate options, while not negatively affecting our preferred timeline.

Sorry, Tacoma. I know you want to submit an application, too. But, you don’t meet basic threshold of having “more than one million people.”

Austin does.

Regarding real estate, like many cities in Texas, there are vast swaths of relatively underdeveloped land. I’d argue much of the land in South Austin and east of 35 is relatively under-developed. It won’t be easy to aggregate parcels, admittedly, as a result of small lot development in much of those areas. However, the pricing – even in Austin where real estate pricing is ticking upwards – is relatively modest compared to other tech heavy markets.

Austin has Whole Foods

Whole Foods is based in Austin, and is of course now entirely owned by Amazon. That means that a significant share of the over 30,000 Whole Foods employees are already based in Austin where Amazon will be looking to consolidate its grocery operations.

I know the HQ2 will be a co-equal headquarters to the Seattle office, but does that mean that the Whole Foods HQ will in some way be a junior HQ to the other locations if HQ2 isn’t co-located in Austin?

There are a lot of talent reasons to figure out how to take care of the talent at Whole Foods, and locating HQ2 in Austin is an easy way to both solidify the retention strategy of those employees and to integrate their knowledge into other Amazon lines of business.

Austin has the weather

The dry heat of Austin is the opposite of the Seattle wet cold.

This climate diversity allows Amazon to recruit both those that want to hit the slopes near Seattle, and those that want to clear brush for their horses near Austin. If you don’t like the gray weather of Puget Sound, Amazon has a place for you with Austin.

As America’s southern most state capital, you might be surprised how far south Austin really is. The Tex-Mex culture is infused throughout the otherwise cosmopolitan verve of the city. It’s not Dallas cosmopolitan, or Houston. It’s not San Antonio. Rather, it’s the kind of feel that tech folks often gravitate towards, ranging from hot yoga to SXSW.

The libertarian ethos at Amazon will find a home in Texas

Here’s what the guidance says Amazon is looking for when it comes to a business climate.

A stable and business-friendly environment and tax structure will be high-priority considerations for the Project. Incentives offered by the state/province and local communities to offset initial capital outlay and ongoing operational costs will be significant factors in the decision-making process

As many have noted, the lack of an income tax in Washington State is matched by a lack of income tax in Texas. Moreover, the heavy reliance on tax revenue from oil and natural gas in Texas means the tax burden per individual is lower in Texas than in Washington State.

Now, that libertarian tax regime is complemented by a city (Austin) and a county (Travis) that are both more socially progressive. They are “sanctuary” areas and are litigating the state’s attempt to punish such jurisdictions. They are also advocating against the bathroom bill passed this year in the legislature.

That kind of social awareness is often a draw to a tech culture that nevertheless likes the idea of low tax rates.

Taken together, these five points likely push Austin to the front of the line. The community benefits from much of what Seattle offers and which has supported Amazon’s growth. Austin also benefits by being what Seattle isn’t in ways manifest both in business-friendly climate and in a different weather climate.